William R. Boulton
Electronics manufacturing technologies include all the materials, electronic components, assembly equipment, and processes required to produce electronic products. The range of technologies encompasses the design and packaging of semiconductor devices in both single and multichip configurations; the production of discrete and embedded passive devices and both flexible and rigid circuit boards used for mounting components; and the processes and equipment used for assembly and testing operations. The availability and configuration of these technologies determines the size, performance, cost, and style of the products that a firm can produce.
In a prior JTEC study published in 1995 (Boulton), it was clearly documented that low-cost electronics manufacturing provided the basis for Japan's past leadership in many of the key materials, components, and types of equipment used in the manufacture of electronic products. High-volume, low-cost electronic products are pushing the development of packaging-related component and process technologies far beyond their expected limits. Development of next-generation products has resulted in continued miniaturization with added functionality at existing cost levels. Today, miniaturization technologies that allow for increased functionality and higher-density assembly include multichip modules (MCM), ball grid array (BGA) chip packages, tape carrier packages (TCP), and direct chip attach processes.
Such process and component technologies are rapidly being globalized. U.S. semiconductor producers like Intel, Texas Instruments (TI), and Motorola have transferred significant R&D capabilities to countries in Southeast Asia. Leading U.S. contract manufacturers like SCI and Solectron have major production facilities in Singapore and Malaysia. Most major Japanese firms have established production operations throughout Asia. In addition to transfers of technologies into Southeast Asia by leading U.S. and Japanese firms, domestic companies in the Republic of Korea (hereafter referred to as "Korea"), Taiwan, Hong Kong, the People's Republic of China (PRC or simply "China" in this report), Singapore, and Malaysia all are fully exploiting advanced manufacturing technologies. Nam Tai in China and Inventec in Taiwan, for example, use wire bonding for inner lead chip attachment and tape carrier packages with outer lead chip attach processes to assemble personal digital assistants (PDAs). The rapid acquisition of these advanced production processes by Asian counterparts drives U.S. and Japanese electronics firms to continue to pursue new areas in which they can assert their technological leadership.
Low-cost manufacturing leadership of computers has now transferred to countries outside of Japan and the United States. For example, Hitachi, one of the world's technological leaders, has outsourced personal computer production, since this no longer requires "advanced technologies." In 1995, Taiwan's production share of computer components like motherboards, mice, and keyboards ranged from 64-72% of the world market. In newer technologies like network cards, CD-ROMs, graphic cards, and portable PCs, Taiwan's market share ranges from 11 to 38%. Three of the world's largest notebook computer makers, Acer, Inventec, and GVC, are Taiwanese companies. China's leading domestic producer of desktop computers, Legend's QDI, is headquartered in Hong Kong. Japanese firms, having lost their ability to economically assemble low-cost products, are now concentrating on exporting their advanced technologies in the form of electronics materials, components, and high-precision assembly equipment. Japan's surface mount technologies (SMT) are available globally. Taiwan also has benefited from its own technological capabilities. Its largest export destination, Hong Kong, accounted for over 26.2% of Taiwan's exports in 1995, with 60% being materials and components to be used in China.
Korea, Taiwan, and Singapore are rapidly upgrading their production capabilities to use advanced components and process technologies. Governments in these three countries are committed to advancing electronics technologies by supporting developments in production equipment and related materials and components. Samsung in Korea, Oriental Semiconductor Electronics (OSE) in Taiwan, and NatSteel in Singapore use government support to advance their production capabilities. Samsung, Korea's largest conglomerate and the world's leading producer of DRAMs, also produces SMT equipment. OSE designs and produces multichip modules in BGA packages, and assembles TCP cards for notebook daughter cards1 and PCMCIA cards. NatSteel now uses TCP and SBB (stud bumping bonding) flip chip assembly processes.
These same advanced process technologies are now being moved into China. Nam Tai (headquartered in Hong Kong with production facilities in China) has acquired advanced wire bonding and TCP capabilities, along with top management techniques and Japanese and Taiwanese managers, to produce Sharp's low-end PDA in China. Wong's Electronics (headquartered in Hong Kong with production facilities in China) has cooperated with NEC to produce its newest Pentium desktop motherboard in China. Depending on a product's labor intensity, Wong's Electronics can cut product costs 30-70% by using Chinese products, parts, and assembly. Labor-intensive processes like through-hole insertion of components onto printed circuit boards (PCBs) are more economical in China due to use there of low-cost assembly workers rather than automated equipment. Companies throughout Asia are now transferring most of their PCB assembly of peripheral cards and motherboards for desktop computers to China, where factory workers earn about $65 per month for 72-hour work weeks, compared to $750 per month for 48-hour work weeks in Taiwan and $1,500 per month for 40-hour work weeks in Japan.2 One Japanese customer now builds its prototypes in the WKK factory in Shenzhen.
2 All dollar figures ($) are U.S. dollars, unless otherwise noted.